Special Risk Capital Management LLC

Had Enough (volitility) ? June 24, 2011

Well there . . . quite a week. Down a bunch, then Up a bunch, then back Down. Surely something good must have come out of this . . . right? Actually, down 0.24% for the week, but oh what a ride to get there.

The big “story” was the (continued) Greek financial crisis; not a surprise to readers here, as we’ve been talking about it for many weeks. Then there was oil, and then ________ (fill in the blank). OK, I’m getting tired and just a bit jaded about the “news” and these folks trying to rationalize what is going on. A wise man once told me: “When markets are strong, they’re not much affected by bad news, but when they’re weak . . . well then, they

act poorly.” A lot of nervous people out there, and traders willing to scalp a few quick dollars.

But what does this mean? I believe, in the short-term, continued weakness. A quick look at the volume on up days compared to volume on the down days shows that the down days are more dominant. Right now, we are at the low-end of a range and just bouncing up & down. This base building can go on for a while, especially this time of year. Looks like 1300 at the top end and 1260 at the bottom (S&P 500 Index wise). So we watch and wait for a meaningful breakout, and hope that volume confirms it.

In the mean time, what’s hot? Not much really, but the lesser of evils center around Specialty Retail, Leisure and select Hotels/Restaurants (it appears that the well to do, are doing it). Other than that . . . SGG (sugar ETF).

The chart below shows the number of stocks in the broad S&P 1500 Index that are in Accumulation (green), Unchanged (yellow) and in Distribution (red). Not an encouraging sight, and it’s been this way since June 3rd. We have to go back well into May to see strong stock Accumulation data.